Food Stamp Program

Food Stamp Program

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The Food Stamp Program served an average of 25.7 million people each month during Fiscal Year 2005, and cost $28.6 billion for the year.

The US Supplemental Nutrition Assistance Program[1], historically and commonly known as the Food Stamp Program, is a federal assistance program that provides food to low and no income people living in the United States. Benefits are distributed by the individual states, but the program is administered through the U.S. Department of Agriculture. Most food stamp benefits are now distributed using cards but for most of its history the program had actually used paper denominational stamps/coupons in 1's, 5's, and 10's. These stamps could be used to purchase any prepackaged edible foods regardless of nutritional value (for example soda and candy could be purchased on food stamps). In the late 1990s, the food stamp program was revamped and actual stamps were phased out in favor of an ATM card known as an Independence card or Electronic Benefit Transfer (EBT). Most states renamed the program as a result, but in effect the EBT cards can still be used for Food Assistance only. Many states merged the use of the EBT card for public assistance welfare programs as well.

The number of Americans receiving food stamps is projected to reach 28 million in 2009, the highest level since the program began. Recipients must have near-poverty incomes to qualify for benefits averaging $100 a month per family member.[2]

History

The First Food Stamp Program (FSP) - May 16, 1939-Spring 1943

The idea for the first FSP has been credited to various people, most notably Secretary of AgricultureHenry Wallace and the program's first administrator, Milo Perkins. Of the program, Perkins said, "We got a picture of a gorge, with farm surpluses on one cliff and under-nourished city folks with outstretched hands on the other. We set out to find a practical way to build a bridge across that chasm." The program operated by permitting people on relief to buy orange stamps equal to their normal food expenditures; for every $1 worth of orange stamps purchased, 50 cents worth of blue stamps were received. Orange stamps could be used to buy any food; blue stamps could be used only to buy food determined by the Department to be surplus. Over the course of nearly 4 years, the first FSP reached approximately 20 million people at one time or another in nearly half of the counties in the U.S. at a total cost of $262 million. At its peak, the program assisted 4 million people simultaneously. The first recipient was Mabel McFiggin of Rochester, New York; the first retailer to redeem the stamps was Joseph Mutolo; and the first retailer caught violating program rules was Nick Salzano in October 1939. The program ended when the conditions that brought the program into being (unmarketable food surpluses and widespread unemployment) no longer existed.

Pilot Food Stamp Program - May 29, 1961-1964

The 18 years between the end of the first FSP and the inception of the next were filled with studies, reports, and legislative proposals. Prominent Senators actively associated with attempts to enact a food stamp program during this period are Aiken, La Follette, Humphrey, Kefauver, and Symington. From 1954 on, Congresswoman Leonor Sullivan strove unceasingly to pass food stamp program legislation. On September 21, 1959, P.L. 86-341 authorized the Secretary of Agriculture to operate a food stamp system through January 31, 1962. The Eisenhower Administration never used the authority. However, in fulfillment of a campaign promise made in West Virginia, President Kennedy's first Executive Order called for expanded food distribution and, on February 2, 1961, he announced that food stamp pilot programs would be initiated. The pilot programs would retain the requirement that the food stamps be purchased, but eliminated the concept of special stamps for surplus foods. A Department spokesman indicated the emphasis would be on increasing the consumption of perishables.

Mr. and Mrs. Alderson Muncy of Paynesville, West Virginia, were the first food stamp recipients on May 29, 1961. They purchased US$95 in food stamps for their 15-person household. In the first food stamp transaction, they bought a can of pork and beans at Henderson's Supermarket. By January 1964, the pilot programs had expanded from eight areas to 43 (40 counties, Detroit, St. Louis, and Pittsburgh) in 22 States with 380,000 participants.

Of the program, Congresswoman Leonor K. Sullivan asserted, "...the Department of Agriculture seemed bent on outlining a possible food stamp plan of such scope and magnitude, involving some 25 million persons, as to make the whole idea seem ridiculous and tear food stamp plans to smithereens."

Food Stamp Act of 1964 - August 31, 1964

On January 31, 1964, President Johnson requested Congress to pass legislation making the FSP permanent. Agriculture Secretary Orville Freeman submitted proposed legislation to establish a permanent FSP on April 17, 1964. The bill eventually passed by Congress was H.R. 10222, introduced by Congresswoman Sullivan. One of the members on the House Committee on Agriculture who voted against the FSP in Committee was then Representative Bob Dole. As a Senator, Mr. Dole became a staunch supporter of the Program. Among the official purposes of the Food Stamp Act of 1964 were strengthening the agricultural economy and providing improved levels of nutrition among low-income households; however, the practical purpose was to bring the pilot FSP under Congressional control and to enact the regulations into law. The major provisions were:

The State Plan of Operation requirement and development of eligibility standards by States;

They required that the recipients should purchase their food stamps, while paying the average money spent on food then receiving an amount of food stamps representing an opportunity more nearly to obtain a low-cost nutritionally adequate diet;

The eligibility for purchase with food stamps of all items intended for human consumption except alcoholic beverages and imported foods (the House version would have prohibited the purchase of soft drinks, luxury foods, and luxury frozen foods);

Prohibitions against discrimination on bases of race, religious creed, national origin, or political beliefs;

The division of responsibilities between States (certification and issuance) and the Federal Government (funding of benefits and authorization of retailers and wholesalers), with shared responsibility for funding costs of administration; and

Appropriations for the first year limited to $75 million; for the second year, to $100 million; and, for the third year, to $200 million.

The Agriculture Department estimated that participation in a national FSP would eventually reach 4 million, at a cost of $360 million annually.

Program Expansion - FSP Participation Milestones in the 1960s and Early 1970s.

In April 1965, participation topped half a million. (Actual participation was 561,261 people.) Participation topped 1 million in March 1966, 2 million in October 1967, 3 million in February 1969, 4 million in February 1970, 5 million one month later in March 1970, 6 million two months later in May 1970, 10 million in February 1971, and 15 million in October 1974. Rapid increases in participation during this period were primarily due to geographic expansion.

Major Legislative Changes - Early 1970s

The early 1970s were a period of growth in participation, concern about the cost of providing food stamp benefits, and questions about administration, primarily timely certification. It was during this time that the issue was framed that would dominate food stamp legislation ever after: How to balance program access with program accountability? Three major pieces of legislation shaped this period leading up to massive reform to follow:

P.L. 91-671 (January 11, 1971) established uniform national standards of eligibility and work requirements; required that allotments be equivalent to the cost of a nutritionally adequate diet; limited households' purchase requirements to 30 percent of their income; instituted an outreach requirement; authorized the Agriculture Department to pay 62.5 percent of specific administrative costs incurred by States; expanded the FSP to Guam, Puerto Rico, and the Virgin Islands of the United States; and provided $1.75 billion appropriations for Fiscal Year 1971.

Agriculture and Consumer Protection Act of 1973 (P.L. 93-86, August 10, 1973) required States to expand the program to every political jurisdiction before July 1, 1974; expanded the program to drug addicts and alcoholics in treatment and rehabilitation centers; established semi-annual allotment adjustments, SSI cash-out, and bi-monthly issuance; introduced statutory complexity in the income definition (by including in-kind payments and providing an accompanying exception); and required the Department to establish temporary eligibility standards for disasters.

P.L. 93-347 (July 12, 1974) authorized the Department to pay 50 percent of all States' costs for administering the program and established the requirement for efficient and effective administration by the States.

1974 Nationwide Program

In accordance with P.L. 93-86, the FSP began operating Nationwide on July 1, 1974. (The program was not fully implemented in Puerto Rico until November 1, 1974.) Participation for July 1974 was almost 1.4 million.

The Food Stamp Act of 1977

Both the outgoing Republican Administration and the new Democratic Administration offered Congress proposed legislation to reform the FSP in 1977. The Republican bill stressed targeting benefits to the neediest, simplifying administration, and tightening controls on the program; the Democratic bill focused on increasing access to those most in need and simplifying and streamlining a complicated and cumbersome process that delayed benefit delivery as well as reducing errors, and curbing abuse. The chief force for the Democratic Administration was Robert Greenstein, Administrator of FNS; in Congress, major players were Senators McGovern, Javits, Humphrey, and Dole and Congressmen Foley and Richmond. Amidst all the themes, the one that became the rallying cry for FSP reform was "EPR" -- eliminate the purchase requirement -- because of the barrier to participation the purchase requirement represented. The bill that became the law (S. 275) did eliminate the purchase requirement. It also:

eliminated categorical eligibility;

established statutory income eligibility guidelines at the poverty line;

established 10 categories of excluded income;

reduced the number of deductions used to calculate net income and established a standard deduction to take the place of eliminated deductions;

raised the general resource limit to $1,750;

established the fair market value (FMV) test for evaluating vehicles as resources;

penalized households whose heads voluntarily quit jobs;

restricted eligibility for students and aliens;

eliminated the requirement that households must have cooking facilities;

replaced store due bills with cash change up to 99 cents;

established the principle that stores must sell a substantial amount of staple foods if they are to be authorized;

established the ground rules for Indian Tribal Organization administration of the FSP on reservations; and

introduced demonstration project authority.

In addition to EPR, the Food Stamp Act of 1977 included several access provisions:

recipients' right to submit applications the first day they attempt to do so;

30-day processing standard and inception of the concept of expedited service;

SSI joint processing and coordination with AFDC;

notice, recertification, and retroactive benefit protections; and

a requirement for States to develop a disaster plan.

The integrity provisions of the new program included fraud disqualifications, enhanced Federal funding for States' anti-fraud activities, and financial incentives for low error rates.

The House Report for the 1977 legislation points out that the changes in the Food Stamp Program are needed without reference to upcoming welfare reform since "the path to welfare reform is, indeed, rocky...."

EPR was implemented January 1, 1979. Participation that month increased 1.5 million over the preceding month.

Cutbacks of the Early 1980s

The large and expensive FSP proved to be a favorite subject of close scrutiny from both the Executive Branch and Congress in the early 1980s. Major legislation in 1981 and 1982 enacted cutbacks including:

addition of a gross income eligibility test in addition to the net income test for most households;

temporary freeze on adjustments of the shelter deduction cap and the standard deduction and constraints on future adjustments;

annual adjustments in food stamp allotments rather than semi-annual;

consideration of non-elderly parents who live with their children and non-elderly siblings who live together as one household;

required periodic reporting and retrospective budgeting;

prohibition against using Federal funds for outreach;

replacing the FSP in Puerto Rico with a block grant for nutrition assistance;

counting retirement accounts as resources;

State option to require job search of applicants as well as participants; and

The Mid- to Late 1980s

Recognition of the severe domestic hunger problem in the latter half of the 1980s led to incremental expansions of the FSP in 1985 and 1987, such as elimination of sales tax on food stamp purchases, reinstitution of categorical eligibility, increased resource limit for most households ($2,000), eligibility for the homeless, and expanded nutrition education. The Hunger Prevention Act of 1988 and the Mickey Leland Memorial Domestic Hunger Relief Act in 1990 foretold the improvements that would be coming. The 1988 and 1990 legislation accomplished the following:

establishing severe penalties for violations by individuals or participating firms; and

establishing EBT as an issuance alternative.

Throughout this era, significant players were principally various committee chairmen: Congressmen Leland, Hall, Foley, Panetta, and de la Garza and Senator Leahy.

Mickey Leland Childhood Hunger Relief Act

By 1993, major changes in food stamp benefits had arrived. The final legislation provided for $2.8 billion in benefit increases over Fiscal Years 1984-1988. Leon Panetta, in his new role as OMB Director, played a major role as did Senator Leahy. Substantive changes included:

allowing States to exempt up to 15 percent of the estimated number of ABAWDs who would otherwise be ineligible;

restoring eligibility for certain elderly, disabled and child immigrants who resided in the United States when PRWORA was enacted; and

cutting administrative funding for States to account for certain administrative costs that previously had been allocated to the AFDC program and now were required to be allocated to the Food Stamp Program.

The fiscal year 2001 agriculture appropriations bill included two significant changes to the Food Stamp Program. The legislation increased the excess shelter cap to $340 in fiscal year 2001 and then indexed the cap to changes in the Consumer Price Index for All Consumers each year beginning in fiscal year 2002. The legislation also allowed States to use the vehicle limit they use in a TANF assistance program, if it would be result in a lower attribution of resources for the household.

The Farm Bill of 2002

Participation declined throughout the late 1990s, even more so than expected based on the changes in PRWORA and falling unemployment. Program access and simplification of program rules were a major focus of proposed legislation and of major regulations promulgated by the Department. In May 2002, the Food Security and Rural Investment Act of 2002 was enacted, including reauthorization of the Food Stamp Program. Major changes to food stamps included:

restoration of eligibility for food stamps to qualified aliens who have been in the United States at least five years;

restoration of eligibility for immigrants receiving certain disability payments and for children, regardless of how long they have been the country;

adjusting the standard deduction to vary by household size and indexed each year for inflation;

reforming the quality control (QC) system by basing financial sanctions on consecutive years of high error rate;

replacing enhanced funding for States with low error rates with a performance bonus system based on several different measures of performance;

providing States with several options to simplify the program, including aligning the definition of income and/or resources to that used in TANF or Medicaid, adopting a simplified reporting system, and providing transitional benefits for clients leaving TANF;

cutting E&T funding while eliminating the requirements of targeting those funds toward ABAWDs; and

eliminating the cost neutrality requirement for EBT systems.

Food stamp participation began to increase in fiscal year 2001 and has continued to rise through the beginning of fiscal year 2003. The Department continues to work with States to implement the various provisions of the Farm Bill, through guidance and regulations.

Statistics

51 percent of all participants are children (17 or younger), and 65 percent of them live in single-parent households.

55 percent of food stamp households include children.

9 percent of all participants are elderly (age 60 or over).

79 percent of all benefits go to households with children, 14 percent go to households with disabled persons, and 7 percent go to households with elderly persons.

36 percent of households with children were headed by a single parent, the overwhelming majority of whom were women.

The average household size is 2.3 persons.

The average gross monthly income per food stamp household is $640.

41 percent of participants are white; 36 percent are African-American, non-Hispanic; 18 percent are Hispanic; 3 percent are Asian, 2 percent are Native American, and 1 percent are of unknown race or ethnicity.

An annual report released by the USDA about the composition of households participating in the Food Stamp Program is identified as the Characteristics Report.

Critics of the program

Housing expenditure

The lack of affordable housing in urban areas means that money that would have been spent on food is spent on housing expenses. Housing is generally considered affordable when it costs 30% or less of total household income; rising housing costs have made this ideal difficult to attain.

This is especially true in New York City, where a recent survey shows that more than 28% of city renters are spending more than half their income on rent. Amongst lower income families the percentage is much higher. According to an estimate by the Community Service Society, 65% of New York City families living below the federal poverty line are paying more than half of their income toward rent.

The current eligibility criteria attempt to address this, by including a deduction for "excess shelter costs." This applies only to households that spend more than half of their net income on rent. For the purpose of this calculation, a household's net income is obtained by subtracting certain deductions from their gross (before deductions) income. If the household's total expenditures on rent exceed 50% of that net income, then the net income is further reduced by the amount of rent that exceeds 50% of net income. For 2007, this deduction can be no more than $417, except in households that include an elderly or disabled person.[4]

The adjusted net income, including the deduction for excess shelter costs, is used to determine whether a household is eligible for food stamps.

Income maintenance

The purpose of the Food Stamp Program as laid out in its implementation was to assist low-income households in obtaining adequate and nutritious diets. According to Rossi, “the program rests on the assumption that households with restricted incomes may skimp on food purchases and live on diets that are inadequate in quantity and quality, or, alternatively skimp on other necessities to maintain an adequate diet”.[5] Food stamps, as many like Rossi, MacDonald and Eisinger contend, are used not only for increasing food but also as income maintenance. Income Maintenance basically is the money that household would have spent on food that they no longer have to; since households no longer have to spend this money on food, they can spend it on other things. The FSP is meant solely to increase food purchases, not to act as a tool of income maintenance.

According to various studies shown by Rossi, because of income maintenance only about $0.17-$0.47 more is being spent on food for every food stamp dollar than was spent prior to individuals receiving food stamps[6]

Nutritional improvement

Another benefit sometimes attributed to the Food Stamp Program is that it makes nutritious food more readily available.

According to the National Food Consumption Survey individuals in food stamp households do not differ significantly from those living in non-recipient households in the nutritional quality of the food eaten. As a result, Rossi argues that this objective is not being met.[7]

Proponents of the Program

Work support

The Food Stamps Program is known in public policy circles as a “work support,” meaning it is used primarily by people looking for a job, or employed but not making enough to make ends meet. Because food stamps allow this latter group to maintain their low-wage employment, most experts believe food stamps actually keep people off the welfare rolls. Peer-reviewed research on the "dependency" effect referenced above is non-existent. The available evidence, in particular a University of Maryland study conducted in 2002, indicates that enrollment in the food stamps program keeps former welfare recipients from sliding back into poverty and re-enrolling in welfare programs.[citation needed]

Fraud and abuse

Claims of fraud and abuse of the program have likewise proved to be unfounded. In 2005, 98% of food stamp benefits went to eligible households. According to the Government Accountability Office, at last count (2004), only 4.48% of food stamps benefits were found to be overpaid, down by more than a third from six years earlier.[citation needed] Two-thirds of all improper payments were found to be the fault of the caseworker, not the individual.[citation needed]

Healthy foods

Finally, while the evidence is mixed as to the effect of the food stamps program on weight gain, studies conducted by the USDA[citation needed] on the receipts of food stamps purchases have found that program participants are more likely to spend their income on fruits, vegetables and healthy foods than low-income consumers who do not participate in the program.